tv Fast Money Halftime Report CNBC April 23, 2012 12:00pm-1:00pm EDT
that does it for us today on a very busy morning. hand it off to the judge, who is back on the "halftime report." see you tomorrow. >> carl, thanks so much. we're all over the sell-off on the street today with four hours to go until the close. here's where we stand. red arrows across the board. political and economic uncertainties over in europe. road concerns in china all waying on the markets today. you've got the major averages. as i said the dow down about 140. we're in the red across the board. gold is down, about half a percent or so. there's crude oil down 1.5% today. here are the stories following. allegations of a corporate cover-up in walmart. do you dare buy the stock? and one top analyst making a very bold call. the apple sell-off. when will it stock? the stock breaks through key support levels. what's the play ahead of earnings? and we're talking to the man who runs fidelity's largest fund,
one you likely own, about today's sell-off and where he sees opportunity today. welcome to the "fast money halftime report." let's talk to the traders, because there is a lot to trade today. you've got netflix earnings coming up after the bell, apple earnings tomorrow. obviously have the walmart story. joe terranova what do you do today? >> i think there are certain things that you do look to buy here. you're looking for the quality names. i think the market overall is in a trading range between 1340 and 1400 in the s&p. we came down this morning after german manufacturing weakness. and that really set up a very lousy tape. but you go back, you look at where we are right now on the day, again, financials have been a source of opportunity throughout this year. you want to talk about quality, i find it in jpmorgan. took a position there on the pullback. like the price action today. i think you could look for things here. i think we're at the bottom of this trade. >> you not only took a position, let's be clear you bought jpmorgan this morning. >> yes, absolutely. and the price action itself, again, it goes back to yes,
they've got quality, yes the earnings are good. kind of away from some of the macro concerns we're seeing in the market place, but the price action today really what allows you to step in. you've got a great point of reference down below to know what your risk is. >> murph, what do you see? >> i agree with joe on the jpmorgan call. we're long the name. we added to the tham today. you came in this morning, very weak tape, found the european news, the china news, had everybody concerned this morning. but if you notice, since the open, scott, it hasn't really drifted lower. you know, we've held that level. a lot of people talked we could push down 2.5%, 3% like europe did but we didn't. so we went in this morning looked at names that announced earnings last week, so post-earnings names where you already got a look, you already saw that you had good announcements on the earnings front. ingersoll-rand is a name that we added to this morning. johnson controls, jci, another name we added to. i think you can go in and you can buy the dip on this move. >> db raises the interesting question as murph talks about earnings you've got 80% of
companies topping expectations now you have the european concerns coming back into the market. is europe going to be driving the train forward regardless of what we do on the economic perspective or from an earnings story? >> i think you're on to something there, judge. one, it's good to have you back. second of all you are on to something with europe. look at what happened with kellogg's this morning. they warned just because europe is weaker than expected. so no matter how good the economic news is, until we resolve europe, i think it's going to be some tough sledding here. there's some great numbers out there. you were talking about some of the banks. look at regionals, suntrust, sti doing very well. there are pockets of strength, but in a big macro sense, this market could be lower every day that you see the european market lower. >> let me get the headline on the bottom of the screen for everybody. facebook buying patents from microsoft for $550 million. as joe terranova, i'll hit you on this front. seems like the price of patents have been reprised. basically, it was just microsoft that bought patents from aol?
for about $1 billion. >> phenomenal deal for al. and we talk about this and it goes back last summer, what google did in doling out, in essence, buying motorola mobility for the patents themselves. i think in the technology space this is going to be something that's in play. and you hear this news and the first thing that you think of, r.i.m. they've got patents. are they going to be able to monetize them. >> give me your thoughts, you don't have to give me a comment if you don't want to be on the facebook story we're talking about related to the pat ends. but just the overall market? >> i think the overall market if i'll go back to what b.k. was talking about in terms of earnings, i think the one thing that was positive, as you look back, back last week on friday like a mcdonald's, they talked about the strength in the u.s. market. so i do think there are some very good signs and i know we're going to talk about some of the housing stuff in a little bit. they talked about some good things going on also. so there are glimmers of hope, so to speak, on the economy. i don't think that it's all going to be europe bringing us down. it may be a short-term story. but there's a lot of positives actually, domestically, that i
think we can point to, as we go forward. >> that raises the question of what is the biggest concern for stocks right now. whether it's going to be europe or china. you know, bk, if you look inside the earnings reports, at the commentary, you seem to get a consistent view that europe is definitely the issue where maybe there's a brighter view about what's happening in china. you could look at anybody from whether it's alcoa or coca-cola, yum, p&g, anybody, really that has reported thus far from the conference call commentary, seems to call out europe is the issue. maybe not so much worried about china. >> right. and especially the ones that are focused on the chinese consumer that you just mentioned like a young. last evening we had the hsbc china pchlt mi came in at 49.1. still showing contraction. but it's not a hard landing. it's not completely falling off a cliff. you still have a billion people in china. that are consuming, that are changing their habits. those are the names that you do want to see in europe. doesn't really change -- at least my mind, about the chinese consumer. >> murph?
>> agreed. and judge i was going to say last year at this time, we had a great start to the year. all of a sudden europe flared up and we had a major meltdown throughout the summer. a lot of professionals i speak to have been saying we're not going to get caught in that trap again. we see the same thing happening again. i believe it's different. i believe nobody has the playbook. and i believe it's going to be different this time. that's why you're seeing the markets in europe down 2.5, 3% today. nobody wants to get caught. >> the problem is is that you've got not only the economic uncertainty, murph. but supposedly, fighting for his political life, you have the political uncertainty factoring into the entire global market. >> we have our own political uncertainty here. nobody wants to be involved with that. that gives you a reason to "a," step away or "b" get short. >> judge, just on that political uncertainty the netherlands is a very serious issue. they were staunchly supportive on austerity. as soon as they couldn't meet their budget estimates they dissolved the government and now we don't know. what does that mean for the greek elections come may 6th.
i don't think it bodes well. >> they're referring to the austerity elections falling apart over the weekend. >> you have to go back to october. the markets rally 25%, 30% in some cases here. you've had now this is a pause. these are april showers, do they lead to may flowers, i don't know necessarily that they do. there's uncertainty everywhere. there's uncertainty what monetary policy is going to be. we haven't talked about the fomc which is going to meet. yes, there is uncertainty. you have to throw out this concept. this binary decision of risk on, risk off. i don't think it applies right now. what applies is finding the right valuation and finding quality, and opportunities. look at the energy space right now. something that i haven't liked. you've got the oil service names, which had gotten obliterated pulling back. now they're starting to look attractive. take a look at halliburton, hornback offshore. >> if you're going to break the market down by sectors you would flt that materials are getting hit especially hard. as you look at precious metals, we touched on gold earlier. it's falling alongside the overall market today.
cboe gold index is about at a two-year low hitting its lowest level as i said, since february of 2010. murph what do you do with gold? >> i think with gold it's still a sell. i think there's a lot of people out there that want to push the commodity itself lower. and we've talked about shorting gold. been on the wrong side of it before. but i think gold is going to go lower from here. >> j.j.? >> i have to agree with murph. and the reason being, you're not seeing the new money coming in to gold like you are on stocks on pullbacks right now. you're starting to see money be reallocated to stocks. die don't necessarily see that happening in gold. >> let's hit what has to be one of the biggest stories of the day. allegations that walmart stymied an internal investigation into bribery at its mexican subsidiary likely to lead to regulatory scrutiny and could cost some executives their jobs. some are speculating that that could happen. our next guest maintains his buy rating on the company and sees today's pullback as a buying opportunity. welcome david extraser, welcome to the show.
>> thank you. >> why are you so welling to give malmart the benefit of the doubt? >> first of all you've seen the pullback today. the stock, this issue is going to be more i think based, hurt individuals and not necessarily the institution of walmart. they may have a fine, even a big fine, but they'll be able to absorb it. i think the other side of it if you want to take the optimistic approach, there's been a lot of people, who aren't thrilled about how aggressive they've been growing internationally and lowering returns pip this has to slow down or does a good job of slowing down the international growth and may over time drive returns higher. >> there are competitors of yours on the street today who would say exactly the opposite, that slowing down the international growth, and perhaps even growth here could be a negative. rather than any kind of positive. >> well, i think the growth in the u.s., i don't think, is going to be impacted that much. this is about you know, whether or not these smaller consets can work in the u.s. i don't think this issue is going to have an impact there. i just disagree, i think if they slowed that down and you started to see returns go up, everything we've looked at at retailers,
and when they slowed down and focused on returns on investing capital, stocks go higher. it's pretty simple that correlation is apretty strong one. >> would your expectations be to potentially target or a costco would be a beneficiary here, some investment dollars that were to come out of walmart off this news? >> yeah, maybe. but i don't think it's going to be that big of an impact. i get you and costco has this great reputation globally. i just, i don't know, i don't think it's going to be that big of an issue. i think the bigger fear on walmart is at the individual level for some people that were involved. and that's assuming, obviously, that all of the information in the article is correct. >> murph? >> yeah, what i see when i look at this walmart i see an opportunity to jump in in a name similar to what you were saying. you get a headline, knocks a quality name down 5% to 6 prgs. is there anything, is it possible there's more to come from this? is it possible that as you peel back the onion there's a much bigger scandal out there? >> i think that is the risk. i get that.
that could be the risk. quite fwrangly, i think that if we look at all of the retailers in the u.s. that do a lot of business overseas who knows how much, we start peeling the onion across all of these guys what happens out there. i mean, every country runs, you know, works their own way here. these guys got caught. >> yeah, i mean i think it's somewhat that kind of statement though overshadows the bigger issue. it's not maybe the bribery or the alleged bribery, if, in fact, it happened, yes that's part of the story. but isn't the cover-up, if there was a cover-up, can't you make the case that's the most serious of the two issues if you were to break it down into two issues? >> i guess it's like politics. it's always the cover-up that gets you not so much the crime. that is -- those are the risks here. and unfortunately as an analyst, for either you're pro or negative, everyone's dealing with not all the facts right now. they're dealing with one article that may or may not be 100%, you know, accurate. and if it gets that much bigger then it could have bigger implications. at this point, i mean, i think
you know the first thing is, i'd be buying a youback here and second of all, i think from the point of view of return standpoint i think this is probably a positive. >> david, thank you. retail analyst over at janny capital. b.k., trade this one for me. i just don't see how this could be anything but a near-term overhang on the shares. >> yeah. i would agree with you there, judge. i think, with all the retailers out there that are doing things right, why would you buy walmart at this point now? i mean, you could go to a jcpenney, something that is trying to remake themselves. you can go to some of the specialty retailers, even go to like a costco. >> but not to mention what about the dollar stores? let's not forget about the inroads that the dollar stores themselves have made against walmart in the last few years. >> right. and the problem you have with walmart is you wake up one morning and there is a perp walk here and somebody does get arrested and accused of doing some wrong doing and your stock is down 5%. i would stay far away from this now. >> judge, to your point on the dollar stores, last summer when you had a pullback in the entire economy, those dollar stores
outperformed all the other names. they did very well. so great place to look. >> okay let's go to our julia boreston out in california, presumably with the facebook/microsoft pattern deal we were telling you about. >> that's right. facebook is paying $550 million in cash to microsoft for about half of the patents that microsoft acquired from aol for about a billion dollars. so facebook is going to obtain about 650 of aol's patent and patent applications plus a license to some of the aol patents and applications that microsoft will purchase and own. now, to give you some context of why facebook is doing this there were some reports that facebook was also interested in buying these patents directly from aol, but the reason why they're doing this is because these patent wars are getting increasingly litigious. and yahoo! has sued facebook for using some of its -- some of its -- for alleged infringement on some of its patents. so facebook is clearly here trying to protect itself as it
heads into its ipo, which is expected sometime in may. so, this is a company trying to hedge its bets, trying to protect itself and trying to invest in some of these patents to avoitd other losses. scott? >> all right, julia, thanks. just a comment here. clearly microsoft must have known when they were buying the patents from aol they were going to get rid of some, maybe they didn't realize, or maybe people didn't realize they were going to get rid of some that quick. what are the implications for microsoft? we're sitting here talking about facebook. what about for microsoft? >> i think the emily indications for microsoft are basically neutral. i think the implications again, if you go back on a price basis to aol which is back below 25 are good. and again, aol was very successful in monetizing these patents. >> i'll say. >> stack ran up. now you got a little bit of a pullback. this is where you pull the trigger. this is the opportunity. >> do we know if he got approval from the board for this purchase? >> i don't know what we know at this point. coming up on the "halftime report" housing one bright spot. is it proof the bottom is in?
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halftime report." fast fire as you know our traders are fast. but sometimes they get burned. take a listen to mike murphy's transportation play just a couple weeks ago. >> the company announced earnings this morning. earnings were solid. they've been getting killed recently. no exposure to coal so i think this company can rally a lot from here. >> apparently they're still getting killed. they're down about 14% since you made that trade. what's your opinion here, has it changed? >> glad i'm not wearing the same tie. we're still long the name here, judge. but if you look at what's happened in the rails, csx came out with earnings, solid numbers. coal has really laid on this space a lot. if you look at a greenbriar, they're focus is on intermobile cars, if you see the most recent data we've seen intermobile orders have spiked up. so this company right now is by far the cheapest in the group. we believe that it's going to -- when it rallies, that 14% will come pretty quickly. it's a small cap name. it has big swings and we're still long the name. >> when and if it rallies. >> correct.
>> b.k., your thoughts on the stock or the space? >> you know, the intermobile space is pretty interesting as murph talks about unfortunately greenbriar is a stock and it's getting killed with every other stock today. but i think murf's on to something. csx earnings weren't that bad. it was just coal that knocked them down. i'm with murph. i still like this one. >> shares of d.r. horton the largest u.s. home builder by volume. gains after reporting better than expected earnings. let's welcome megan mcgrath. >> thank you. >> good quarter. >> yeah, it was a decent, solid quarter for them. they made none if i. they continued to make money. their orders were up about 19%. but we've been telling folks to pay attention to what the ceo said about the overall broader housing market. he thinks it's maybe flatish, maybe slightly up. their orders up were due to share gains. >> it raises the interesting, you know, issue of where housing currently sits. who do you listen to?
do you listen to a company like this? was it kbh a couple weeks ago spooked the market? some of the higher end home builders get positive calls on the street. where are we today in housing? >> yeah, that's why we've been saying pay attention to horton's ceo, he's gotten it right over the last couple of years. he's been very cautious. he's only been calling for a flat 2012. he raised that a little today. things are going to be slightly up on a macro basis for the year and kb home said very similar things about the housing market overall. we're improving, but it's spotty. only in certain markets are we seeing things up. only in certain markets are the builders getting pricing power. so i think we're up a little versus last year. maybe single digits. and that hasn't really been enough to sustain the rally that we had in these stocks in the first part of the year. >> traders want to get involved in the conversation. j.j. is first. >> megan, you know, we talk about the great earnings with dhi et cetera and you talk about the sector overall. how bad is the overhang of
foreclosure housing on the sector? i mean obviously it has to take a big effect in the phoenix and florida areas but nationwide is this still a big effect for these home builders? >> yeah, it's interesting. i think what you're seeing now, it's lessening. what the builders tell us and what we're hearing is that it's not necessarily specific competition, that a new home buyer isn't necessarily looking at a foreclosure at the same time. they're separate markets. but where it does impact them is on pricing and appraisals. they still have to comp for that in a lot of places. it's keeping them from raising their overall prices although not necessarily the same buyer. >> you have a sell rating on the stock. was their earnings report a little bit better than expected to you? did it catch you off guard at all? and also tell me why you've got ryeland and toll as two of your only buys in the space? >> actually we have a neutral on horton and a $16 price target. so, it was kind of in line with expectations and really our neutral rating was more valuation based. it's a good, solid company, they're doing okay. but they had just traded up a
bunch. ryland and toll we think an a three to twelve month trade they look a little bit more compelling and if these stocks are really trading down on european concerns that did present an opportunity in the summer if you were patient since they're domestic industries but it might take a little while. >> megan great to have you on the show. thanks so much. megan mcgrath with mkm partners. coming up on the "halftime report," will danoff the man who runs fidelity's biggest fund the contra fund and core holding in many 401(k)s is here to tell us why he's bullish on america and where he sees opportunity now.
welcome back. this is the hfl time's top three trades now. pretty gymnasting look chart for kellogg. shares hammered down more than 5% after preannouncing weak first quarter results. b.k. what do you see here other than a nasty looking chart? >> nasty. stay away from special k. it looks terrible. interest also talked about the u.s., not quite matching up to the estimates that they wanted. if you're in kellogg now, don't be. >> all right. second conoco phillips lower today, after profits fell short of estimates. hurt by week refining margins. murph? what's your take here? stocks down a third of a
percent, but choppy chart as well. >> right, judge, conoco opened up real week this morning on a flight earnings miss but the stock's trading just about its high for the day right now so it's rallied. you can see it rallied off the lows. the focus on conoco, they had decent production numbers but the key here, the end of this month they're going to be splitting into two publicly traded companies. >> and third groupon shares are in the green on a down day after the company was upgraded to overweight from equal weight. groupon shares just shy of 1.5%. >> i think they put a $15 price target on it. the problem i have with stepping in and buying these, it could go below where it is right now. slightly below 12, maybe even below 10. you want to wait until earnings, which is the middle of may, the expiration lockup has now been pushed out to june 1st. let's get past that first and then we'll reconsider buying this which has gotten obliterated after the april 2nd news. >> how would you invest $100 billion? that's the question fidelity portfolio manager william danoff
faces every day. his contra fund is the company's largest and one of its most succe successful posting an 8% return over the last decade. he joins us now in a rare tv interview. mr. danoff, it's great to have you on the show. thanks so much for coming on "fast money halftime report." >> thank you so much. >> you're looking at an ugly market for the most part. how do you feel by and large on the markets, you know, overall? >> you know, scott, i, because i'm so big i tend to be longer-term than many of your listeners. but as i look out, large cap, s&p 500 companies are trading at almost 13 times earnings, smaller companies are about 20 times earnings. and i don't think that's very expensive for what i see in the growth opportunities i see for a lot of big cap companies in the s&p 500. so, i'm bullish, you know, as you know, u.s. economy is benefitting from lower interest rates. lower natural gas prices are a huge positive for our country. the weak dollar is making u.s.
manufacturing very competitive. the consumers paid down debt. so i see a lot of positives out there. >> if you were to buy america, as you suggest, where would you look right now? >> i am positive on u.s.-secentc companies. u.s. banks don't have to worry about problems in europe, chinese competition. retailers, restaurants, u.s. centric companies that are going to benefit from continued improve month in the u.s. economy. >> what's the best sector and what's the sector that i want to avoid? >> that's a good question. you know, as i said, i see opportunities in the u.s.-centric sectors. i mentioned retailers, restaurants, regional banks strike me as improving, the sector is consolidated since the housing crisis in '07 as has the housing sector, so i think home builders are good.
i also what i call global best of breed multinationals, the largest companies in the s&p 500 are as cheap thaz they've been in 15 years. you know, companies like coca-cola, or colgate-palmolive. these are companies that are going to be able to sell their products throughout the world to the 2 billion consumers that are coming in from the emerging markets. they have excellent financials. they've got great brands. they've got great financial models. they're generating, 5%, 6%, 7%, free cash flow yields which makes them very attractive relative to bonds and cash. >> i'm told you can't address specific companies but apple is your largest -- your largest core holding here. can you make any comment about why you hold it, and what you think of the recent sell-off, if it makes you nervous about the holding? and we can go from there. >> yeah, scott, you know, apple is a great example of what i call best of breed. i have done quite well for my shareholders over 20 years in contrafund, beating the s&p handily by 350 basis points
lower risk, and apple is an example of a best of breed company. they have better products. they've got a very motivated management team. they've got opportunities to sell a very handful of products all over the world. they've been successful. they continue to be success. they've got, you know, great financials. they generate a lot of free cash flow. so, that's an example of a kind of company, and it's been an unbelievable stock, as everybody knows. >> sure. >> and it's not particularly expensive, either. so, you know, apple is the kind of company, you know, that i want to own over time. >> has the last week made you nervous? i mean the stock's been down 5% over the last week. breaking through some key technical levels today, in fact. >> right. you know, i tend, you guys are fast money. i try to be, i guess, slow and smart money, and you know, you got to take advantage of the opportunities the market gives you, scott, and you know, if one advantage that fidelity has is
we've got a really capable strong team of analysts and other fund managers, we're calling, you know, companies every day, i'm seeing management teams every day. and we have access to the companies, so, when we're concerned or we're worried we can just call the company and review the facts with that company or we can review the facts with the competition and you know, it's a huge source of conviction that i get over time when the market is volatile. >> let me just ask you one more question and i'd like to get your traders involved, as well. you obviously mentioned the u.s. centric companies, restaurants, some retail as well. why are apple and google your two biggest holdings and yet you don't talk about technology as being very much in favor, at least in the way you think about the market? >> right. no. that's a very good.. one of the reasons i'm so bullish on the united states, scott, is that the u.s. is the leader in many technology areas. we are the leader in, you know, the internet. we are the leader in software. so, and as you know, these technology companies have unbelievable business models.
they outsource much of their manufacturing so they have high margins and generate free cash flow and can sell their products virtually everywhere in the world. i am bullish on technology. apple and google are i think very attractively valued and have low good long-term products. >> hey, brian kelly. you talked about your ability to talk to management of these large companies. while you're talking to them every day, what do they think about europe? how is their european business doing and how does that impact how you invest? >> brian, that's a very good question. most companies are saying that europe is not really growing at all. that europe is pretty much flat. i think that, for the most part is, you know, discounted in the marketplace. i try to invest, as i said, in these best of breed companies. companies with unique products, and unique services that will be able to gain market share in a flat market. so, hopefully those companies gain market share in europe, they continue to grow nicely in the u.s. they continue to expand in other
emerging markets in asia, obviously the markets are large and growing. so, europe, to me, makes the u.s. much more attractive right now. >> and bill, before i let you go, let me just because berkshire hathaway is the third largest holding that you have in the fund, i'd like to get you on the record commenting on the announcement, of course, from warren buffett last week that he has stage one prostate cancer. how do you feel about the stock, knowing that? >> warren buffett is a best of breed executive. berkshire hathaway has probably the best insurance franchises in the world. he is probably the best allocator of capital in the world. i think the stock hasn't done anything in about 15 years, earnings continue to go up. he continues to buy great operating companies, so you know, i can't comment on individual companies but i think the company is very well positioned, and you know, my understanding of stage one prostate cancer is that, you know, he has hopefully still a long life to live. >> you would add to share -- i
mean it wouldn't cause you to not add to shares from this point forward? i think that's where i'm trying to get to. >> you know, virtually every company has key man risk, but as i said, i think the franchise at berkshire hathaway is extremely strong and quite enduring and again it depends on your time. i tend to be longer-term and i think berkshire hathaway is going to be able to continue to grow earnings, and most of their businesses are going to gain share, generate free cash flow, and i don't think you're paying very much for that franchise right now at all. >> is walmart in your fund? >> i am a shareholder of walmart, just one last point on berkshire, 10% over book value. so very attractively valued. wall mar the news this morning, i think, is an example of how difficult it is to do business overseas, and another reason why i'm bullish on the u.s. we live in the rule of law, and we live in a world where we see transparent -- relatively transparent financials. certainly relative to other markets outside the united states.
you know, walmart's shares have not done anything in about 14 or 15 years, while the earnings have steadily grown. so walmart is probably at a third the p/e it was in the last '90s. generating a lot of free cash flow, they still are the low cost provider in the united states. and i see that as an example of what i was talking about earlier, large cap s&p 100 stocks are quite cheap, the cheapest i've seen in 15 years. >> got you. >> that's one of the reasons i'm bullish on large cap north america. >> mr. danoff, thanks so much for your time. >> great to be you with, scott. good luck to you. >> thanks so much. >> i think he highlighted you want to look for quality names in this environment. it goes back to what i said before -- >> not for quality names, quality u.s. centric names. there are a lot of quality names out there but he has a real focus -- >> the focus on -- >> to invest. >> on the u.s., yes. but i'll push back a little on
that and say that i lot of what apple's valuation and apple's price action continuing to appreciate is the growth. the growth that you've seen overseas, the growth that you're seeing in asia. so, listen, the u.s. is a desired right now land for assets, i think you can look for quality globally though. and the only thing i don't or somewhat disagree with is i never understood what define money as smart. i'm still trying to figure that one out. >> real quick, i wanted if i had a chance ask will, i'd love to say i agree with his take on u.s. and us centric businesses but something like a caterpillar where they have exposure in china, just wondering if he would invest in a name like that. >> coming up on the "halftime report" should you go long or short netflix ahead of earnings? ♪
[ male announcer ] for our families... our neighbors... and our communities... america's beverage companies have created a wide range of new choices. developing smaller portion sizes and more low- & no-calorie beverages... adding clear calorie labels so you know exactly what you're choosing... and in schools, replacing full-calorie soft drinks with lower-calorie options. with more choices and fewer calories, america's beverage companies are delivering. silver hit a 13-week low today and our next trader sees more risk to the downside. let's get your realtime trade from steve cortez, founder of veracruz and a cnbc contributor. we had some commentary from the desk already that was negative on gold. silver is following suit today. >> yeah, scott, and i concur on gold although i would rather
short silver. three week reasons. the first is weakness in asia. indian shares trading at a three month low that is typically extremely important for precious metals taiwan lowered a ten week low. the second one qe. i do not believe quantitative easing simment in in this election year. and the third one is simply the silver chart. it is trading poorly on its own. it is underperforming gold so gold is weak but silver is worse. that indicates to me that retail money is far too provent in to the cheaper silver story. >> two of the reasons could just be gold you're talking about, as well. the third obviously is more silver specific. >> exactly. and that's why i short silver. i'm doing this primarily through the inverse epf, the dfl, i was long for a couple weeks, i added to that position basically right here at 11:50. i think in a world of low greth and low inflation, silver does not belong in terms of silver futures which are will about $30. i think that was extremely expensive. they belong closer to 20.
>> zsl as in zebra? >> that's right. >> netflix reports earnings later today and analysts are expecting a net loss in eps. the number everyone's waiting for however is netflix's added subscriptions which can show us how the company is holding up against the increase in competition. our next guess has an underperform on netflix and says pushing new subscriptions could hurt its bottom line. joining us is equity research analyst at web bush. good to see you again. >> hey, scott. >> it's not just the number of subscriptions we're going to be really focused on today. it's the number of video streaming subscribers, correct, that the street's really going to be focused on? >> i think the number that matters to the bulls is domestic streaming subs. that number the guidance is the high end is 1.93 million. netflix did something that they don't really do every quarter. they advertised like crazy in the second half of the quarter. they tend to do that only if they really want to juice
numbers. so i'm giving a pretty strong feeling that they're going to just blow that 1.93 million number away. they are clearly giving their investors exactly what they want, which is subscriber growth, nobody seems to care about earnings except for me. so the answer is smart money is people who talk to me at smart money, people who care only about subgrowth without earnings are dumb money. but i think the dumb money is going to chase this thing up and chase it higher tomorrow. >> if they blow the number away, especially on the domestic video streaming line, doesn't that give credence to reed hastings and his argument and the bullish case, if that number comes in negative then the bears will be out in force saying see the competition is hurting. just like we told you it would and perhaps more than you thought? >> when you buy a stock like yelp or pandora or groupon, and they show you, you know, user growth, then you understand that they can sell those users more ads. so you see how revenue follows users. when you see users go up with
netflix, they aren't selling them ads. they're selling them somebody else's content, and the cost of that content is going up more rapidly than their growth, so it's not necessarily highly correlated subscriber growth and profits. i think the bulls have gotten this completely wrong. i think reed's only focused on subscriber growth so he's going to deliver it in march. you mentioned competition on the lead-in. the competition really hasn't started yet. it's starting this quarter, and the content quality is going down this quarter because the starz deal ended at the end of february. so i think you're going to have a confluence of events in june, and i think that their growth is going to stall, i think that their growth domestically ticks down in the september quarter, and that's when i think it's over for this stock. i think netflix will be half of today's level by this time probably october by the time they report the september quarter. >> okay. so, yeah, kind of clear this up for me. because in january you have the stock lift above 100. you've got a $45 price target, not disagreeing with that. the question is, though, again
the timing. so this quarter, this report we're going to get tonight, we shouldn't expect an on lit ration of the price itself of netfl netflix, it's more in the forward looking quarters, correct? >> absolutely. stock goes up tomorrow, because i think they beat the high end of the subnumber. i think the stock trades only been subscribers, domestic streaming subs. if that number goes up the stock goes up. when that number goes down and i'm predicting it goes down in the september quarter the stock goes down. >> one quick question for you. in terms of being able to hold onto their subscribers, and retention rate, should we start looking for that in tonight's earnings or again does that go out six months also? because you said the quality of the content is going down. the quality is going to start going down, i would expect the retention rate would go along with that. >> they lost about half of their new movies, meaning eight years old and newer. they lost about half of those as of march 1st. subscribers don't notice that overnight. so people don't just look and say, oh, my god, there's half as many movies. that's a gradual thing. you just keep looking for
something to watch and you finally, after six weeks or eight weeks decide it's not worth it and you quit the service. i think you're going to see that happen in the june quarter and it's going to crescendo in the september quarter. so, no, tonight, they're going to -- everything's going to be great. the management's going to paint a rosy picture. this time six months from now the stock is going to be cut in half. also whitney tilson is long netflix. he'll be on the "halftime report" tomorrow at noon eastern on the "fast money halftime report." b.k. do you have a trade on netflix for me? you obviously know where pacter comes down. you're going to hear a different story tomorrow from whitney tilson. >> unless whitney tells me that he disagrees with michael and he's the smart money i'm going to listen to michael. i want to be the smart money. netflix to me has been a stock uninvestable for awhile. i don't get the story. other people do. i stick with michael and stay away. >> same thing i'm looking for a
ralbly in the name today. i'm looking to get short the name. i agree it goes lower. >> coming up on the "halftime report," are apple expectations too high ahead of earnings? find out how one shareholder is playing it and what the options market is saying ahead of that big report tomorrow afternoon. i think it's final seconds, ohh, shoots a three, game over. so two seconds ago... hey mr. and mrs. harris, where's kevin? say hi kevin. mom, put me down. put...the phone...down. hey guys. did you hear... the choys had their baby? so 29 seconds ago. well we should get them a gift. [ choys ] thanks for the gift! [ amy and rob ] you're welcome! you're welcome! [ male announcer ] get it fast with at&t. the nation's largest 4g network. covering 2000 more 4g cities and towns than verizon. at&t. ♪ on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants
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the markets. obviously the walmart story that's unfolding, as well. meantime apple is getting set to report second quarter earnings tomorrow after the closing bell. collect in with j.j. and see how options traders are trading the tech giant ahead of earnings. i gather there's got to be a lot of options octavety on apple ahead of that report. >> there certainly is, scott, as you would expect. it's kind of interesting. in the weekly options, which exspire on friday we're seeing a lot of people buying the 5770 call and the 595s and 600s. a lot of optimism there. what i found interesting as apple broke down this morning below the 568 support, it's since bounced back, we saw people coming in for the disaster books, the may 500 puts, the may 495 puts i guess the take away, people do expect some good earnings but afterwards are the statements going forward. we talked about worldwide problems. perhaps there could be some of that in ap am's statements. >> all right, our next guest says apple expectations are too high and he's not buying ahead of earnings.
we're joined by channing smith, capital advisers growth fund live from tulsa. great to have you on the show. expectation should be high, right, it's high. it's a 600 or so stock even though it's down about 5% or so the last week. what makes you believe they're too high? >> well, what you've seen really over the last week is that earnings estimates have risen. we're well above $10. we have ipad units going out. iphones well over 30 million. so unlike past announcements, we're seeing a lot of activity going into -- a lot of upgrades into the announcement. we're a little cautious. we have 90% analysts have a buy. we want to take a step back. what can go wrong when everyone else is so bullish on the stock. >> do you really believe that ipad 3 sales are going to be disappointing that iphone sales are going to come in below expectation expectations? >> absolutely not. they're going to beat. the question is what's that beat going to look like. i think with expectations
rising, you have to see, you know, how big is the beat going to be? that's going to determine the direction of the stock price. one thing mentioned on the program earlier, if you look at the technicals, the 10, 20 and 50-day moving averages have been breached. that's a sign of negative momentum. if the earnings come in and don't meet analyst expectations, you could see some downside because we don't have that technical support we've had the last couple months behind the stock. >> it's mike murphy, channing. with apple being held to such a high regard because they've done so well, but -- two fronts. on the technical front, if they come out and blow the quarter away as they've been known to do, we open plus 30, 35, 40 points tomorrow, the technicals are out the window and setting up new chart patterns there. from a fundamental standpoint when you have a company that's come out, they have new products, outsell them, the numbers have been great, from a fundamental standpoint, isn't this a name you want to own and you'll give up the 5% swings one way or the other?
>> well, we own it. we had a 7% position. we trimmed it back. and, yeah, you want to own for the long-term. i guess where we would disagree with the analyst community is what is the trajectory to 700, 750 on a price target. as we move into the technology cycle of mobile internet and the mass adoption stage, what you're going to see are pricing pressures and see that innovation gap close. apple is well ahead in innovation. we expect to see that continue. however, as we move along in the quarters, you're going to see pricing pressure. we saw in the verizon call that there's some concerns about those cost subsidies. >> right. >> so going forward you've got to watch the price expectations. and really we focus on operating margins. we will continue to focus on that. and going forward you might start to see a little bit of pressure on those operating margins as the industry matures. >> thanks so much. great to have you. >> thank you so much. >> just a quick read on apple. do you really believe that the subsidy model is going to change
any time soon? >> there have been three notes at least in the last week talking about that. >> the fundamentals for apple remain incredibly bullish. when you take the ticker symbol off the chart of apple, it's not a stock that looks like it wants to go up in the near-term. >> we'll trade tweets when we come back. ♪ ♪ [ female announcer ] you're the boss of your life. in charge of long weekends and longer retirements.
good. >> joy global long above 80. i'm getting killed. i've taken it off my screen. i'm hoping for an m&a. i don't want you to do the same. >> i think the entire space is under pressure. stay away from silver, stay away from gold. i would not buy this on a pullback. >> final trades from the team when we come back we'll go around the horn. rds of any small business credit card! how does this thing work? oh, i like it! [ garth ] sven's small business earns 2% cash back on every purchase, every day! woo-hoo!!! so that's ten security gators, right? put them on my spark card! why settle for less? testing hot tar... great businesses deserve the most rewards! [ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? here's your invoice.
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final trades. let's go around the horn. j.j. in chicago kick us off. >> based on what mcdonald said, i'm looking for yum and starbucks to enjoy the same spending. >> b.k. >> hide in u.s. bonds buy tlt. >> murphy. >> ingersoll announced earnings last week very positive and an opportunity to get in today. >> earnings after the bell. >> texas instruments trade between 32 and 34. i think it's going to be an okay earnings tonight. watch analog. in semiconduct i bought nxpi. that reports this week. i like it. >> don't forget whitney tilson will be on tomorrow reac t